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Family Dollar buy out: Who wins, who loses?

Family Dollar makes it money by selling things that don't cost a lot of money to people who don't make a lot of money. But Family Dollar sells stuff at a variety of low prices. At Dollar Tree, everything costs a dollar or less. They don't stock a lot of the same stuff, meaning they can't cut costs by buying even more stuff in bulk. So where could they cut costs?

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Family Dollar buy out: Who wins, who loses?

Family Dollar makes it money by selling things that don't cost a lot of money to people who don't make a lot of money. But Family Dollar sells stuff at a variety of low prices. At Dollar Tree, everything costs a dollar or less.
WCNC

CHARLOTTE, N.C. -- This is a mega merger that caught analysts by surprise.

"I don't know anyone who thought Dollar Tree would be the buyer," said Brian Yarbrough, an analyst with Edward Jones.

He thought Dollar General would be the suitor, but Dollar Tree?

"It's two different business models, totally," Yarbrough said.

Family Dollar makes it money by selling things that don't cost a lot of money to people who don't make a lot of money. But Family Dollar sells stuff at a variety of low prices. At Dollar Tree, everything costs a dollar or less. They don't stock a lot of the same stuff, meaning they can't cut costs by buying even more stuff in bulk. So where could they cut costs?

"There'll be people losing their jobs," Yarbrough said.

Not so much the people who work in the stores, but the people who work in places like Family Dollar headquarters in Matthews.

"I think it'll be more just headquarters job losses and things like that where there's a ton of overlap," Yarbrough explained.

Family Dollar, for its part, says it doesn't anticipate cutting jobs in Matthews, at least not now. And Yarborough doesn't think either chain will close more stores, even though Family Dollar was already in the process of closing more than 300 of them.

So, who wins? Shareholders, especially the big ones. Howard Levine, the CEO, just saw the value of his stock jump by hundreds of millions of dollars. Same deal with big shareholders like Carl Icahn and Nelson Peltz, who had been calling for a sale.

Bottom line, the rich get richer. And folks who don't make a lot of money will still be the prime customers for Family Dollar, even after the takeover goes through.